The Poetry of Aspirational IP Systems

Posted on June 30, 2017 by Gerald Barnett

In 2015, Ann Hammersla, once a senior university licensing officer and now working for the NIH, gave a talk at an NIH Regional Seminar on Program Funding and Grants Administration–“Inventions, Data Sharing, Reports to NIH, and other Intellectual Property Considerations.” Much of the talk concerns the complexities of university technology transfer and compliance with federal regulations. Given that Hammersla now represents the NIH on the matter, it is interesting to see how she imports the faux-Bayh-Dole approach prevalent in universities into her government position.

Hammarsla defines “Intellectual property” as “creations of the mind”–so, basically anything that a mind might create. That’s rather expansive, when compared with, say, statutory intellectual property (patent, copyright, trademark), even extended to include trade secrets. That’s a worrisome direction.

According to Hammersla, here’s the purpose of an “IP system”:

This is a very strange depiction of things. Continue reading →

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Key Concept 4: Ad Hoc Patent Office

Posted on June 29, 2017 by Gerald Barnett

Ad Hoc Patent Office

Institutions create ad hoc patent offices by compelling the assignment of patentable inventions, obtaining patents on those inventions issued to the institution, and then re-issuing the patents as private monopolies. Such ad hoc patent offices forestall the market for inventions by intercepting them, seeking to raise their value, and then reselling them as monopolies. Inventors are required to assign their inventions to the office, which then has U.S. patents issued to it. The office then re-issues those patents on its own terms. Key characteristics that differentiate an ad hoc patent office from a market for patents are 1) assignment of inventions to the office is mandatory; 2) the office has patents issued in its name–it does not act as an agent for the inventor; 3) the office trades in patents using conditional assignments that convey a patent monopoly to a private party in exchange for a financial share in the private exploitation of the patent.

Federal government agencies operate ad hoc patent offices when they require inventors to assign inventions to the federal government, and then issue patents to themselves, to be managed by the federal agencies. Under Bayh-Dole a federal agency may issue exclusive licenses, with express authorization to include the right for an exclusive licensee to enforce the patent–essentially making an exclusive license into an assignment. The patent is re-issued, as it were, to the exclusive licensee, who holds the patent (other than with regard to the information at the USPTO) as its own, subject to those requirements in the license that the federal agency is willing to enforce–which may mean, other than submission of reports and an initial payment, there is no enforcement at all.

When a university compels inventors to assign their inventions, acquires patents on those inventions, and then offers to assign or exclusively license the inventions, preserving the patent monopoly for the new acquirer, an ad hoc patent office comes into existence. The university ad hoc patent office then re-issues the patents under terms that different from those of the patent system. When the university is a public university, an instrument of state government, then a state government compels inventors to assign inventions to the state so that it has standing to direct that the federal government issue patents to the state government, to be exploited for financial value as monopoly assets. Continue reading →

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Key Concept 3: FOIL Technology

Posted on June 28, 2017 by Gerald Barnett

FOIL Technology

FOIL is an acronym that stands for “Fragmented Ownership Institutionally Licensed.” Technology that is FOIL is fragmented across institutional owners that then seek to license their portion of the technology for development as a commercial product. FOIL is a crucial concept because the analysis of a “national system of innovation” cannot be conducted by reasoning from any single institution’s purposes and practices in isolation from all the others. If one person runs through an open door, it’s high drama. But if fifty people all try to run through the same door at once, it is either tragedy or slapstick–or both. FOIL is the result of three hundred universities all trying to do the same thing with bits of the same research platforms, but justifying their operations as if each is the only one in the world doing it.

Example: Nanotubes

Consider carbon nanotubes. A search at the USPTO for abstracts in issued patents with “nanotube” and assignee of “university,” “institute,” or “foundation” yields 1227 patents. In the last three years alone, there are 127 more patent applications from universities, institutes, and foundations. We might expect that there on the order of 60 more patent applications by these organizations that have been filed but not yet published.

As a result of all this patenting activity, just about anything relating to a carbon nanotube is subject to one or more patent claims, each controlled by a nonprofit institution that seeks to grant a royalty-bearing exclusive license to create commercial product based on the claimed invention.

In isolation, such an effort sounds reasonable–this is technology transfer using a patent as the incentive to attract needed private risk capital. But in aggregate, the situation is impossible to navigate. Any one company to have sufficient rights, must seek licenses from multiple nonprofit institutions, but each institution has a default of licensing exclusively and demands a royalty. Many institutions in fact now prefer to license exclusively to a closely affiliated startup company. Such licensing means that a company seeking to exploit carbon nanotubes will find the complete package of rights necessary to operate without infringement unavailable. Continue reading →

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Key Concept 2: Substantial rights

Posted on June 27, 2017 by Gerald Barnett

Substantial Rights

Substantial rights is a concept used by courts in considering whether an invention has been licensed or assigned. The substantial rights in an invention are the rights to make, use, and sell. If these rights are licensed exclusively, then the substantial rights in the invention are said to pass to the licensee, and the invention has been, in fact, assigned for the duration of the license contract.

Inventions and Patents

Substantial rights concerns an invention. We may distinguish title to a patent on the invention. When an inventor invents, federal common law provides that the inventor is the owner of the invention. An inventor may make, use, and sell the invention, subject only to various laws that may regulate the production of goods and trade. An inventor, then, may also choose to give up these rights–to agree not to make, use, and sell his or her invention in favor of someone else having these rights. Of course, without a patent, the only benefit that a recipient of the invention gains is the promise of the inventor not to make, use, or sell the invention. Anyone else who learns of the invention and its manner of operation may also make, use, or sell the invention.  Continue reading →

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Key Concepts 1: Dual Monopoly

Posted on June 26, 2017 by Gerald Barnett

Dual Monopoly

A dual monopoly approach to innovation management involves both a comprehensive institutional demand for ownership of inventive work and an institutional determination to convey monopolies in that work for private exploitation. The first monopoly is an institutional one. The second monopoly is a market one, created on the premise that the attempt to transfer a monopoly right to a speculator or company an invention will result in that invention being developed as a commercial product. The combination of these two monopolies creates the impression of a working–even highly successful–institutional system to create commercial products from university research. In practice, the dual monopoly approach is among the worst possible choices for university technology transfer, rarely works as claimed, and frequently withholds research inventions from public use.

In the dual monopoly approach, a university creates monopolies (by acquiring inventions from its personnel and seeking patents) and then transacts these monopolies (typically, by exclusive licenses that are assignments). Thus, the approach to innovation is to move monopolies into the hands of investors in those monopolies, and in exchange taking a share of the investors’ returns from their exploitation of the monopoly right (typically, one or more patents). Thus, the dual monopoly approach diverts inventive work from broad circulation preferentially into the hands of those speculative investors who insist on monopoly control to justify their investments. Continue reading →

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What should the federal government do with patents it issues to itself? Part 2

Posted on June 25, 2017 by Gerald Barnett

The Bayh-Dole Dissatisfaction with the Patent System

According to its advocates, starting with Sen. Bayh, the idea of behind Bayh-Dole was to require federal agencies to pre-assign their ownership interest in invention contract deliverables to university contractors. It’s a clever argument.

We might say that Bayh-Dole arises as a dissatisfaction with the patent system. It uses the federal government’s right (established by federal contract, as a condition of providing funding) to inventions as deliverables to transfer this right to contractors who host the research–even though the contractors in the case of universities receiving subvention funds on behalf of faculty investigators have absolutely nothing to do with proposing the work, directing the work, or employing (in the sense of an employer) faculty to do the work.

University patent brokers did not like that patents issued to inventors, not to employers, and especially not to institutions that weren’t even employers but just organizations handling federal money on behalf of investigators. University patent brokers also did not like seeing the federal government move inventors from industry problems to federal problems, or from independent research to federal research–and thus forestall the market for university patent brokers. University patent brokers also did not like to see federal agencies use patents in ways that did not involve a profit motive and did not play favorites to achieve the best profits. Bayh-Dole, made a part of federal patent law, expresses these dissatisfactions in the form of restrictions on what federal agencies may contract for by way of inventions made in federally supported research.

Inventions are to issue to contractors, not to inventors and not to the federal government. Contractors may then trade in patents for money and to play favorites without federal agency intervention. What made Bayh-Dole exciting to university patent brokers was the idea that Bayh-Dole created new patent law that made inventions owned by universities rather than by inventors. Sen. Bayh insisted that this was in the law, at the foundation of the law. The Supreme Court in Stanford v Roche disagreed, and ruled that nowhere in Bayh-Dole is there any indication that Congress intended to change federal common law that inventors own their inventions. There is nothing in Bayh-Dole that vests inventions made with federal support in contractors, gives contractors a mandate or first right or incentive to acquire these inventions, and nothing that authorizes any federal agency to require as a default funding condition that contractors must acquire ownership of such inventions to comply with Bayh-Dole or with the terms of any funding agreement. Continue reading →

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What should the federal government do with patents it issues to itself? Part 1

Posted on June 24, 2017 by Gerald Barnett

Here is a question: What should the federal government do with patents it issues to itself?

Some Context

In the 1940s and 1950s, as the United States government contracted for research services associated with the development of weapons systems and the procurement of goods to meet its needs, a debate arose about whether the government should include delivery of patentable inventions as a contractual requirement or whether the government should instead require a non-exclusive license to patentable inventions for its own use, whatever that may be. It’s a limited dichotomy, of course, but as with most political things, things got polarized and formalized into this form. In science policy terminology, these were the “title” and “license” alternatives for government contracting. The government could take title to inventions, or take only a license.

Beyond the dichotomy were other alternatives, which also were used. The government for instance, could limit the scope of what could be privately patented–which it did for a time with atomic power inventions and space technologies. The government could not even require a license to inventions made with its support–which it did and still does for fellowship funding. Fund a project, take a license. Fund a person, take nothing. And the government could take title to an invention but grant a license back to the contractor, so the contractor could practice the invention outside work for the government.

For the most part, early federal funding for research took the form of procurement from commercial vendors and from contract research organizations. A commercial vendor was a company that sold product, and the government’s contract asked the company to build a version of the product for the government. A contract research organization’s product was the research it was contracted to do. In the case of a contract research organization, it was easy to manage invention deliverables, since contract research organizations make it a practice of delivering invention rights along with everything else in the research. If the federal government restricted its research contracting only to CROs, the executive branch patent policy would be easily uniform–require delivery of rights to patentable inventions along with everything else. Continue reading →

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A New Guide to Bayh-Dole–Outline Version

Posted on June 23, 2017 by Gerald Barnett

Here’s an alternative guide to Bayh-Dole and its doppleganger faux Bayh-Dole. There’s a whole book in here, but I’ve left out the chapter and verse documentation and the historical evidence and interviews and the like. This is not the version of Bayh-Dole you will read in university technology licensing office brochures. But how much do you believe of anything written by institutional administrators in a brochure?

Short form, if you don’t have the time:

Bayh-Dole: kittens on the carpet with a ball of string!

faux Bayh-Dole: kittens and bricks in a gunny sack!

The Purpose of Bayh-Dole

The purpose of the Bayh-Dole Act was and still is to enable pharmaceutical companies to gain monopoly control over discoveries in medicinal chemistry made at universities and supported by federal government grants.

An Inside Job

Bayh-Dole was an inside job within the NIH, with the help of university patent brokers, especially WARF. To give pharmaceutical companies such monopolies, the NIH and WARF had to disable PHS patent policy and the executive branch patent policy on which the PHS policy was based. They had to put their changes out of reach of the PHS. So they drafted Bayh-Dole to supersede executive branch patent policy by federal statute. Norman Latker at the NIH had someone else type the final draft of the bill to prevent it from being traced to his own typewriter.

An Arbitrary Patent Policy

Bayh-Dole applies when a federal contractor acquires ownership of a federally supported invention. In doing so, Bayh-Dole replaces a uniform executive branch patent policy with an arbitrary one, making a single approach to research inventions general across all federal agencies, all forms of research contracting, all contractors (but for large companies), all industries, and all approaches to the use of patents.

Universities as a Front

Universities are used as a front because they appear to be acting in the public interest and (it was argued, against the evidence) will do a better job than the federal government in promoting the use of inventions made with federal support. Continue reading →

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The bogus argument for “mixing” research funds, 5

Posted on June 22, 2017 by Gerald Barnett

Let’s say that companies have diverse views about patenting, as the Harbridge House report documented, and some companies might decline to participate in federal research because they can’t get title to inventions and won’t settle for a mere license. We might argue, then, that these companies might miss out on federal funding opportunities. What is the policy demand that they be included, if that means changing federal patent policy for all other companies? The one class of companies that would be willing to sue to keep others from practicing an invention appears to be the class of companies that Bayh-Dole was built to serve–to the exclusion of all the others. But that’s just the suspect arrangement, not the bogus one.

University patent brokers take this argument about what some companies in some industries might require, if they are to “participate” in federal research, and turn it into an argument that universities have a hard time if they “mix” funding from the government and from these same patent-fussy category 5B companies. Here’s the Bayh-Dole policy statement:

to promote collaboration between commercial concerns and nonprofit organizations, including universities

In the abstract, this sounds pleasant. Who is against collaboration? But really, that’s not the issue. The issue is the special special case, in which pharmaceutical firms offer to screen drug candidates discovered at universities in federal research–so long as the pharmaceutical company gets an exclusive license (=assignment) to anything interesting. That’s the “collaboration” that matters–everything else is rhetorical abstraction. The public interest to address matters of public health through university research becomes, in effect, a subsidy for pharmaceutical companies. Perhaps that is a legitimate government policy position–but then why not out and make the case for it rather than bury it in such a stultifyingly convoluted statute as Bayh-Dole? Continue reading →

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The bogus argument for “mixing” research funds, 4

Posted on June 21, 2017 by Gerald Barnett

The origins of the argument for “mixing” government and private research funds can be found in the 1968 Harbridge House report. The report identifies six industry attitudes toward patenting, ranging from indifference to defensive positions to critical to business. The special special case selects this last attitude, taken from the pharmaceutical industry and directed at benefits to public health, and demands that it be applied to all industries. The bogus argument for mixing does much the same thing. Here are the five industry attitudes (six, really), with Harbridge House’s comment (with minor editing):

(1) Patents have no importance

When these firms obtain patents under government contracts, their sole purpose is recognition of technical competence within the company.

(2) Patents are of little value, compared with technical know-how

Using a new idea to enhance product performance is regarded as more important than assuring that the company owns the exclusive right to it.

Continue reading →

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